Answer to Question #276826 in Accounting for yoona

Question

 A machine with a cost of 200000$ will soon need to be replaced a similar machine that will cost 300000$,

A. What amount should the machine presently owned be reported on the balance sheet?

B. What amount should management use in planning for the cash required replacing machine?

 

Answer 1

Solution:

A.). The amount the machine presently owned should be reported on the balance sheet is $200,000.

A machine is fixed asset which should be reported or recorded at cost on the balance sheet.  

 

B.). The amount the management should use in planning for the cash required in replacing the machine is $100,000.

The management will be able to dispose of the machine at $200,000, so the management will, therefore, only require $100,000 to complete the purchase of the new machine costing $300,000.